I do NOT know how I got on this group chat. They say it’s not classified though, so I guess we’re all good.

A quick note on life insurance: If you have people who depend on your work (paid or unpaid) then you need TERM life insurance. Buy a term for 10 or 20 years. That will cover you during the period where your death will be a financial crisis for your family. After that, a couple things will be different. Your young kids will be grown and won’t be depending on you financially and you’ll have been investing for 10-20 years which means you will have a lot of money! That means your death is no longer a financial crisis, so you no longer need life insurance.

But insurance companies have a problem with term life insurance: It’s cheap. It depends on your age and the term and amount of coverage, but often in the ballpark of $50/month. If you have, say, $600/month after your monthly expenses are covered, you could buy a $50 term policy and invest $550/month. That will cover you in the short term and leave you with millions in the long term.

Insurance companies saw this and thought “Hey, I really want that other $550 too”. So they invented “permanent life insurance”. Unlike term which is truly insurance (pay a small amount sharing the risk in case the bad thing happens to a select few), permanent life insurance is designed to pay out to everyone. It may sound good, but there’s a problem. If they’re paying out on EVERY SINGLE CLAIM you have to wonder how the insurance company is making money. And the answer is by paying out dramatically less than what you would have had if you had been investing directly on your own.

Insurance companies LOVE permanent life insurance because there are massive fees, commissions, and increasing cost of insurance. The remaining premium payments go toward a “cash value” which they claim “can’t lose money”, but it can. If you miss a payment, they take it out of your cash value. If your policy lapses, they keep everything, making it far riskier than a real investment. I’d never buy these products.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy